Welcome to the marketplace – closed shop or open for business?

The store is no more. Not to fear, the ecommerce marketplace platform is here! Awful rhyming aside (my sincerest apologies), I have been struck by two correlatable trends observable in this week’s retail news. The first is the reinvention of the physical store; the second is the proliferation of retail marketplaces online.

After a chastening set of Christmas results for the UK Big Four supermarkets and an alarming drop in footfall expected this month courtesy of Storms Ciara and Dennis, things are not looking good for the beleaguered physical store at the start of 2020. It is encouraging then to see Sainsbury’s launch its new city format “On The Go” store in Mansion House. With a focus on ultra-convenience and personalisation, ranges are clustered into ‘grab and go’ stations that will be changed three times a day for breakfast, lunch and tea. 90% of the assortment has been chosen specifically to meet the needs of Mansion House customers, mainly city workers and commuters. Digital payment services include compatibility with Sainsbury’s SmartShop mobile app and rapid exit checkouts. It will be interesting to see how the new store fares after the trial of Sainsbury’s first cashier-less store flopped just a stone’s throw away in Holborn. Convenience and personalisation are two of the three key themes at the centre of store innovation in recent years, the other being experience. The unashamedly single-channel bricks-and-mortar stalwart Primark is dipping its toe in the experiential waters with the launch of its first-ever pop-up store at Boxpark in Shoreditch – collecting some valuable cool points and green points at the same time. The temporary space marks the launch of Primark’s new Wellness collection created from a combination of organic cotton and recycled or sustainable materials.

Clear exceptions like Primark aside, a strong online presence and ecommerce sales channel is an essential strategic growth driver for most modern retailers. But launching and maintaining a single-vendor platform can be prohibitively expensive, especially for start-ups and new entrants. Marketplaces provide a shared platform to connect customers with multiple retailers. Selling via marketplaces means that retailers can run an ecommerce sales channel without excessive overheads. There is a trade-off however; retailers must accept reduced control and access to valuable customer data, while platform providers are able to harvest data from every single interaction between customers and retailers that takes place on the platform, something that Amazon has famously used to its great advantage. In market share terms, marketplaces are still dominated by the likes of Amazon, Alibaba and eBay, but as platform technology gets simpler and more affordable, we have seen some notable disruption in niche areas or new markets. Fashion marketplace Zalando has enjoyed remarkable success since it started out as a shoe specialist in 2008, and its deal with Nike announced at the end of last year (at the expense of Amazon) was a real coup. With increasing concerns over brand authenticity, counterfeit products and ethical alignment, we could see other big fashion brands shift their presence away from the dominant global players and towards the likes of Zalando, Asos and Farfetch.

Another intriguing development in this area is the increasing popularity of resale platforms like Depop, which now has 17 million registered users, 90% of which are under 26. Resale is growing fast as a sector within fashion as consumers search for sustainable alternatives to wasteful fast-fashion business models. Ensuring a presence on resale marketplaces and tapping into the entire lifecycle of their products will become increasingly crucial for brands. And in a neat twist in the tale, it emerges that the very same ecommerce platforms are busy acquiring physical space. Recent “stores” opened up by Shopify, Depop and Flaconi may well be store-shaped marketing tools focused on brand awareness and content creation, rather than actual sales outlets, but it is still good to see these ecommerce players recognising the importance of a physical presence and investing in square footage.

Have a great weekend,

Ed

Author

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Ed Jobson

Consultant, Retail Supply Chain (Operations Transformation)

Ed has a proven track record of helping multiple major international retailers through large scale business transformation programmes, with a strong interest and recognised expertise in Business Process Design, across Grocery and GM.